Video gaming has gained immense popularity in the last decade with realistic and immersive gameplay, attracting a massive user base globally. Video games offer excellent time with technology since they ease the anxiety and burden of a person’s daily chores.
This surge in the video gaming industry has contributed significantly to its global market. It appealed to several top-notch gaming developers and corporations to invest in creating high-quality games for their audience. Gaming offers lucrative financial benefits to gamers and developers, helping them earn riches through playing games.
The stringent clampdown of China on the video gaming industry has impacted top gaming developers, affecting their processes and in-game operations. Tencent and NetEase are two of the gaming giants in China that suffered a financial loss of billions of dollars due to these regulations.
Stringent Clampdown Of China on Video Gaming
China is a developed country with a robust and powerful economy due to its effective state policies. A country that pushed itself out of poverty has set an example worldwide. However, some of the Chinese policies affect some industries adversely. The video gaming industry is the best example that suffered a massive loss due to the recent limitations on video gaming activities.
Tencent and NetEase are the two video gaming enterprises that suffered the most. According to a report on Statista, Tencent is a massive gaming developer organisation with an extensive share in the global video gaming industry market, with a value of 396.2 billion U.S. dollars. Despite their contributions, the new Chinese regulations will have an alarming impact on the global gaming industry.
The Chinese government came to action against online video gaming platforms taking excessive money from gamers within the gameplay in different forms. If you are a gamer, you would understand that online games, such as PUBG, Call of Duty, League of Legends, Starfield, and so on, offer in-game rewards and offers that drain the cash out of gamers’ pockets.
China’s National Press and Publication Administration
China’s General Administration of Press and Publication (GAPP) is a national authoritative institution responsible for the efficient and impactful regulation of the internet-based press and other work. It offers licences and permission to any company or organisation that aims to provide online services or products.
GAPP is the authority responsible for proposing a regulation to curb excessive internet-powered gaming habits and expenditures. Notably, China is a country that promotes productivity and an efficient working atmosphere. Video game addiction is an adversity to its national interest, causing the Chinese regulatory body to cease and control it.
With a restriction on spending inside the game via offers and rewards, gaming companies are prone to lose a large amount of their income. However, it will prevent gamers from spending money on in-game purchases without compromising gaming features. Analysts, including Brian Tycangco and others, praised the regulation while also forecasting its adverse impact on the gaming industry.
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Tencent and NetEase Stocks Plunge
In the widespread gaming realm, Tencent, NetEase, and Bilibili are the giant players offering state-of-the-art video games for users globally. Tencent, in particular, is the biggest fish in the gaming industry. Despite its other globally renowned app, WeChat, it gets significant revenue from online video games, including Fortnite, Ring of Elysium, and more.
The regulatory proposal of GAPP has an enormous effect on these gaming corporations, as witnessed in the latest Hong Kong stock market. Tencent’s market shares reached their lowest since November 2022, closing at 274 Hong Kong Dollars (HKD) with a 12.4% decrease in its value.
The other gaming company, NetEase, suffered a massive loss of around 115.1 billion HKD in its market capitalisation. Its shares reached about 122 HKD, facing a 24.6% decrease in its value. Another online gaming provider, Bilibili, suffered from a 9.7% decline in its shares’ value, selling at 80.3 HKD.
Quick Read: Tencent’s Ambitious Expansion: “Hunyuan” AI Model Enters Extensive Testing Phase
Video Gaming and Children’s Psychological Well-Being
Video games are immersive and highly addictive, attracting users to infinite gameplay. Children are particularly affected by gaming habits, making them appeal to the exclusive-for-you, and limited-time offers that compel them to spend their money with no physical returns.
China has already regulated screen time for minors or individuals under 18 years. The Chinese policy-makers understand the need to control technology usage and its effects on citizens’ social and personal lives. Therefore, the recent regulatory proposal highlights a few restrictions on online video games.
Costly transactions and daily reward systems in online video games come under stringent clampdown of China on the video gaming industry. Furthermore, gamers will have to comply with a limited threshold of expenses within the game. In case of crossing the threshold, they will get a warning for controlling the spending.
In-Game Expenditure Needs Regulation and Control
China’s effort to curb the expensive in-game purchases is a positive step. Though the market shares of the gaming companies have seen an abrupt change in their shares, they will swiftly regain their value. The regulation has an impact on the control of uncontrolled expenditure on gaming assets.
It will put a limitation on gamers to stop spending tremendous funds while enjoying the in-game features without any issues. In addition, these regulations will compel gaming developers to introduce features that attract gamers without making them put in additional cash. While it is a win for gamers, gaming developers will suffer a little but will regain their momentum soon.
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